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Budgets:- Like them or loath them, you can’t live without them!

Budget’s have become a necessity for all Part 7 Multi-Track matters and were introduced following the Jackson Reforms in 2013.


They are an integral part of the recovery of your costs. However, they are often not given the full credit they require so below is a guide to Budget’s and just how important they are.


Budget’s come in the form of Precedent H as per CPR PD3E (4)(a) and consist of two distinct parts.


The first Part records your incurred costs up to and including the Case and Costs Management Hearing (CCMC). The second Part records your anticipated costs from the CCMC to the conclusion of the matter.


Both Parts are split into Phases:


· Pre-action Costs

· Issue/Statement of Case

· CMC

· Disclosure

· Witness Statements

· Expert Reports

· PTR

· Trial Preparation

· Trial

· ADR/Settlement


There is also provision to include a Contingency Phase for any applications or incidents they you foresee which do not fall into on of the above Phases.


For the sake of completeness, it is good practice to record your work as if an Electronic Bill is being prepared to save time and costs later, and to ensure your Bill is accurate against the Budget. In this case each, as well as being recorded in the correct Phase should also have the correct Task and Activity (which we will discuss in a separate Blog).


In these circumstances, it is always advisable for the Draftsman who prepared the Budget to also prepare the Bill as each Draftsman has their own interpretation of the Phases etc and it is often the case that if you have different draftsmen then the Bill is not accurate against the Budget.


The Budget also contains Assumptions as per CPR PD 3E (10)(a). I can not stress enough just how important your Assumptions are!


Assumptions record the work you expect to happen in that Phase and should be as detailed as possible, if they are not there or are not complete then it will be very difficult later to argue for a good reason to depart from your Budget if you are over Budget in a Phase. Get then right!


Budget Form


CPR PD 3E (4)(b) allows the Budget to be prepared in one of two formats. If the Budgeted Costs do not exceed £25,000 or the value of the Claim as stated on the Claim Form is under £50,000 then you only need to file and serve the front sheet of the Budget.


For all other matters you must file and serve the full Budget.


When to Serve and consequences


CPR 3.13 (1) confirms that all parties, except Litigants in Person must file and serve a Costs Budget.


CPR 3.13 (1)(a) confirms that if the value of your claim as recorded on the Claim Form is under £50,000 then it must be served with the Directions Questionnaire.


CPR 3.13 (1)(b) confirms that for all other cases it must be served 21 days before the CMC.


BEWARE! If you fail to serve your Budget strictly within these time scales, then under CPR 3.14 you will be restricted to Court Fees Only!! You will not be able to recover anything else.


It is possible to make a Relief from Sanctions Application, however this application must be made as soon as possible, do not wait to make the application at the CMC to stand any chance.


Budget Discussion Reports


Once the Budget is served the parties should then attempt to agree each other’s Budget’s, this takes the form of some negotiation and give and take on behalf of both and every effort should be made to agree Budget’s before the CMC. Anything outstanding will be decided by the Judge at the CMC, however, bear in mind that often CMC are listed for say 1 hour which gives very little time to deal with Budgets after dealing with everything else.


Whether Budget’s are agreed in full, part or not at all, both party’s MUST complete, file and serve a Precedent R Budget Discussion Report no later than 7 days before the CMC as per CPR PD 3E (2).


This report is prepared in respect of your opponents Budget, it lists all the phases, the amount claimed in each phase, the amount you are offering for each phase and a narrative explaining the issues or confirming agreement.


Varying your Budget


You must keep a close eye on your Budget throughout the life of your case, if you go over Budget in a particular Phase then unless you can show a ‘significant development’ or ‘Good reason’ to depart from the agreed Budget then your phase will be limited to those agreed at the CMC.


Therefore, reviewing your Budget regularly will allow you to see if you are reaching the limit in a Phase and you can then apply to Vary your Budget via the use of Precedent J. This is something often overlooked by Solicitors, however it should be built into your regular reviews.


I attended a webinar with Craig Ralph and Andrew Hogan, two titans of the Costs world and one of their suggestions, which I completely agree with is to try to Build into your Directions for the CMC

an order to review Budget’s at say the PTR, this ensures both parties’ review the Budget’s and gives each party the opportunity to review each other’s Budget and raise any arguments, and ensures accuracy.


Don’t forget, if you are amending your Budget, take this opportunity to also amend your Assumptions!


What can you recover for preparing the Budget


CPR 3.15 (5)(a)(I & ii) allows costs to be recovered for preparing the Budget of £1,000 or 1% of the incurred costs, whichever is higher.


(5)(b) allows 2% of the incurred costs for all other Budget related costs.


What happens next


Budgets are useful not only for keeping and eye on costs, they have also been used to negotiate costs without having to prepare a full Bill of Costs or to agree an interim payment on account of costs.


However, in most cases a Bill of Costs will be prepared, this must must must be accurate against the Budget, the assessing Court will have regard to the last approved Budget and will not depart from the Budget without Good Reason to do so as per CPR 3.18.


However, trying to prove good reason is difficult, when the argument is raised the Court will ask, why, if you knew this was happening or was likely to happen, did you not apply to vary your Budget and invariably you will be reduced to the level of the agreed Budget.


In Summary


1. You must complete an accurate Precedent H;

2. It must be served within the time limits to avoid being reduced to Court Fees only;

3. You must try to agree Budget’s prior to the CMC and prepare a Precedent R 7 days before the CMC;

4. You must keep a close eye on your phases and apply to vary the Budget if you thin kyu are going to go over in a Phase;

5. It is advisable to have the same person who prepared the Budget also prepare your Bill of Costs.


Waters Legal Costs Ltd are experts in the preparation of Budget’s and pride ourselves on our accuracy and attention to detail to ensure there are no issues going forward.


Please contact us for any further information.


Tel: 07710391848


Thank you

Stuart Waters

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